Charities have warned that changes to the benefits system, which will be debated this week in parliament, could end up impoverishing people with serious health concerns.

Nearly 7,000 cancer patients could lose up to £94 a week in sickness benefits, as a result of a decision to stop paying the allowance to certain claimants after a year, irrespective of whether they are ready to work or not. Other claimants, who have recently become severely ill, will have to wait six months before they are eligible to receive the new benefit.

The reformed incapacity benefit system, with all claimants set to be reassessed under a tougher disability test, is projected to save the government £1bn over five years. Under proposals in the welfare reform bill, many claimants will find that their employment and support allowance payments are automatically cut off after 12 months.

"Many cancer patients will lose this crucial benefit simply because they have not recovered quickly enough. The majority want to return to work as it can represent a milestone in their recovery and a return to normality, in addition to the obvious financial benefits," said Ciarán Devane, chief executive of Macmillan Cancer Support.

"This proposal in the welfare reform bill will have a devastating impact on many cancer patients. We are urging the government to change their plans to reform key disability benefits to ensure cancer patients and their families are not pushed into poverty."

The Citizens Advice Bureau is warning that the proposal to extend the period of time claimants have to wait, from three months to six months, before they can receive the benefit will have a similarly heavy impact on people who have recently become ill.

"People who are suddenly faced with prolonged time off work – because, for example, they have a diagnosis of cancer and need immediate treatment, or have a stroke or a serious accident – often suffer an unexpected and very dramatic drop in income, leading to serious financial difficulties. We already see thousands of disabled people who struggle to get by on benefits, and often end up in serious debt as a result. If these changes go ahead, they will push many more people into significant hardship at a time when they most need support," a CAB spokesperson said.

"We support the government's aim of reforming the welfare benefits system to make it simpler and fairer, but these changes are neither simple nor fair, and will hit the most vulnerable hardest. The huge stress caused by money worries can seriously hamper people's recovery, so this will do nothing to help them get back into the workplace more quickly.".

The time limit will affect those claimants who receive contribution-based benefits, in recognition of their national insurance payments during their working career. Individuals who become sick while on out-of-work benefits will not face a time limit, since claims are means-tested.

These concerns were echoed by Rebecca Rennison, of the Disability Benefits Consortium Policy Group, who said the changes would "push many into debt and poverty and risks denying people the support they need".

"Disabled people are already twice as likely to live in poverty as non disabled people and unless vital changes are made to the Bill this can only be expected to get worse," she said.

The Department for Work and Pensions said these changes would not affect households where no one was in work. "Those who are severely ill and disabled in the support group of ESA will see no change to their benefit entitlement. Nor will there be any change for those on income-related ESA."